<News alert> FY1Q24 GMV beat, while uncertainties persist in a cloudy macro environment
- AFRM FY1Q24 GMV surged by 28% y-o-y to US$5.6b, beat consensus, driven by travel and ticketing and payments coming through partner platforms
- Management guided reaccelerating GMV, revenue growth and stable adj. operating margin in FY2Q24
- With ongoing uncertainties amid a cloudy macro environment and rapidly rising funding costs
Affirm FY1Q24 GMV surged by 28% y-o-y to US$5.6b, higher than US$5.4b expected by market consensus, the robust growth was mainly driven by travel and ticketing spending, payments coming through partner platforms. Business metrics demonstrated solid improvement, with the number of active consumers and transactions per active consumer rising by 15% y-o-y and 25% y-o-y, respectively. Operating loss narrowed by 17% y-o-y to US$209m in FY1Q24, mainly due to effective cost saving plan and resilient credit performance. The management guided reaccelerating GMV, revenue growth and stable adj. operating margin in FY2Q24.
While uncertainties persist amid a cloudy macro environment. We remain cautious on how AFRM’s model will grow in the upcoming quarters amid a cloudy macro environment, where consumer demand and their credit profiles are poised for potential deterioration, and the resumption of student loan payments will be another headwind. AFRM’s funding costs tripled on a y-o-y basis in FY1Q24, and provision for credit losses jumped 55% y-o-y to US$99.7m. The competitors like PayPal, Block and Apple, are aggressively expanding their buy now pay later (BNPL) business with loss-leading tactics, which further exacerbates challenges on AFRM’s ability to pass through the rapidly rising funding costs to their customers. Maintain SELL with TP under review.